2011 Report To Congress On China's WTO Compliance

Office of the United States Trade Representative
December 2011

2011 Report To Congress On China's WTO Compliance

Executive Summary

China acceded to the World Trade Organization ten years ago, on December 11, 2001. The terms of its accession called for China to implement numerous specific commitments over time, with key commitments phased in by December 11, 2006, five years ago. At this point, China is no longer a new WTO member; indeed, China has proven to be a major beneficiary of the global trading system. Accordingly, the United States and other WTO members have been holding China fully accountable as a mature participant in the WTO system, placing a strong emphasis on China's adherence to WTO rules.

Overview

Following China's accession to the WTO, Chinese leaders took many impressive steps to implement a set of sweeping commitments. China reduced tariffs, eliminated non-tariff barriers that denied national treatment and market access for goods and services imported from other WTO members, and made legal improvements in intellectual property protections and in transparency. These steps unquestionably deepened China's integration into the international trading system, strengthening both China's rule of law and the economic reforms that China had begun in 1978. Trade and investment also expanded dramatically between China and its many trading partners, including the United States.

Since China joined the WTO, the impressive growth in U.S.-China trade has provided numerous substantial opportunities for U.S. businesses, workers, farmers and service suppliers, and a wealth of affordable goods for U.S. consumers. In fact, since 2001, U.S. exports of goods to China have increased by approximately 380 percent, rising from a 2001 total of $19 billion to $92 billion in 2010, and positioning China as the United States' largest goods export market outside of North America. China is also a substantial market for U.S. services; the cross-border supply of private commercial services totaled $21 billion in 2010, and services supplied through majority U.S.-invested companies in China totaled an additional $23 billion in 2009, the latest year for which data are available. In 2011, U.S.-China trade in goods and services continued to grow at a healthy pace.

Despite this progress, the overall picture currently presented by China's WTO membership remains complex, given a troubling trend in China toward intensified state intervention in the Chinese economy over the last five years. Increasingly, trade frictions with China can be traced to China's pursuit of industrial policies that rely on trade-distorting government actions to promote or protect China's state-owned enterprises and domestic industries. In fact, in recent years, China seems to be embracing state capitalism more strongly, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership.

After 2006, as China's progress toward further market liberalization began to slow, some Chinese government policies and practices raised increasing concerns that China had not yet fully embraced the key WTO principles of market access, non-discrimination and transparency. Similarly, in some instances, Chinese policymakers showed little appreciation of the carefully negotiated conditions for China's WTO accession that were designed to lead to significantly reduced levels of trade-distorting government policies. Differences in views and approaches between China's central government and China's provincial and local governments also frustrated economic reform efforts, and China's difficulties in fully implementing the rule of law exacerbated this situation.

In 2011, the prevalence of interventionist policies and practices, coupled with the large role of state-owned enterprises in China's economy, continued to generate significant concerns among U.S. stakeholders. Major issues included China's indigenous innovation policies, serious problems with intellectual property rights enforcement, and China's slow movement toward accession to the WTO Government Procurement Agreement, as well as continued market access barriers and discrimination against foreign enterprises in numerous sectors of China's economy.

Throughout the past year, the United States worked bilaterally with China to try to address these concerns. Progress was made on some meaningful issues, but many issues remain outstanding, and the United States was frank in expressing its view that the two sides need to redouble their efforts going forward. In some cases where progress was not possible, the United States is seeking resolution of its concerns through the WTO.

Looking ahead, essential work for China includes the need to reduce market access barriers, uniformly follow the fundamental principles of non-discrimination and transparency, fully embrace the rule of law, and fully institutionalize market mechanisms. Completing this work is critical to realizing the tremendous potential presented by China's WTO membership, including the breadth and depth of trade and investment - and prosperity - possible in a thriving, balanced global trading system.

ENDS

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